WidePoint Corp is a U.S. Govt IT/services contractor who basically help federal agencies manage their mobile phones, telecoms contracts, SIMs/ data bills etc. In short, fairly boring, however they are on the cusp of potentially winning a massive DHS contract (CWMS 3.0) worth up to $3bn over a 10 year period. Their current annualised revenue is \~$160m - Federal IDIQ’s typically execute between 40 - 70% of ceiling (in this case, $3bn) which would add at the 55% midpoint (factoring in replacement of existing CWMS 2.0 contract, roughly 50% additional revenue.
Despite gaining 90% over the last month, still screens as very cheap, at around .6x market cap / revenue (mkt cap . Admittedly more expensive on an EBITDA basis at £1m Adj., however worth noting it’s only gone profitable as of Q1 (which was a good print), so valuation backstopped by solid fundamentals and value at a discount. If the business wins CWMS 3.0 there’s a good chance it rerates to sector norm of around 1x revenue on improved operating leverage, so at \~£240m rev roughly the same EV. Factoring in cash of $11m Fair Value per share is likely $20+ assuming CWMS 3.0 win - vs $9.80 today that’s potentially more than 2X.
Why are they likely to win? They are current provider to the DHS for the CWMS 2.0 contract, and management have indicated high confidence in success. The DHS has a track record of selecting incumbents, and WYY has been the incumbent across the last two CWMS contracts since 2018 - from what I can see it’s performed well and clearly there’s a decently high switching cost for the DHS to change provider given the level of system integration. This is not a zero risk move, but the probability is higher than not that they win - the deadline for the contract decision is June 24th, but we could head anytime in the next few weeks. Probability weighted upside favours this trade in my opinion.
Good luck and happy investing.